February 26, 2005, Another Korean caused crisis....
For this week's visit to Pravda, we'll look at the sharp drop-off in the value of the U.S. dollar against other currencies caused by an announcement that the South Korean Central Bank was moving to shift some of its reserve holdings into Euros. While some (such as George Soros) have, ahem, speculated that speculation abroad, such as in oil-rich Russia, is designed to bring the dollar down, the reality is, as the Pravda piece notes, the world's reserve currency is running a most irresponsible official budget deficit of over $400 billion (and counting it properly by including "off budget" war costs and netting out social security tax receipts) the actual budget deficit is closer to $700 billion).
Needless to say, other nations are playing a balancing game: how to avoid wrecking the U.S. economy (to which the rest of the world is intertwined), avoid collapsing the value of their own dollar holdings, while still acting responsibly toward their own constituencies.
It's tough, given that our government is hellbent on sacrificing the economic well-being of not merely the lower 99% of this country so that our super-rich can pay an even more preposterously small per cent of their income and wealth for taxation to pay for the system that allows them to acquire and hold their immense wealth, but most of the world's population. But what else is new?
Still... it would be one thing if Beijing decided to send shivers up and down our finances by moving into euros (although, given the size of its holdings and our deficits with them, one might wonder if there are that many euros...) but... South Korea? A country whose holdings represent maybe 4% of international dollar hoards? Just an announcement that it will hold part of its reserves in euros sends the dollar down over a percentage point in a day?
I understand that the official national line is "all is well", and 50.1% of the country voted that way and will simply not be disabused of that notion (regardless of whether reality intervenes or not). I'm just detecting some cracks in our economic fortress of solitude.
Comments
I wonder what percentage of the 50.1% who voted for Bush follow the currency market, let alone even know of its existence. I remember reading a Free Republic thread concerning China's purchase of oil from Iran, and one poster suggested irately that the US "should put the squeeze on China." He/she had no clue that that would be like trying to put the squeeze on your credit card company when you had pretty much maxed out your balance.
Posted by Miss Authoritiva at February 28, 2005 2:54 AM
I wonder what percentage of the 50.1% who voted for Bush follow the currency market, let alone even know of its existence. I remember reading a Free Republic thread concerning China's purchase of oil from Iran, and one poster suggested irately that the US "should put the squeeze on China." He/she had no clue that that would be like trying to put the squeeze on your credit card company when you had pretty much maxed out your balance.
Posted by Miss Authoritiva at February 28, 2005 2:55 AM